July 29, 2019 Practice Points

How to Get the Most for Your Client in a Commercial Arbitration

Checklist of items to help you obtain successful results in commercial arbitration.

By Kelly Turner and Conna Weiner

Done right and with the right attitude, commercial arbitration can be a better forum for your client in almost all cases than court:

  • Arbitration is a flexible process that allows parties to customize it
    • pay attention to this at the clause-drafting stage
    • even if you have an unwieldy arbitration clause, parties can agree on a better process during the all-important preliminary hearing
  • Focus on two categories:
    • Methods to keep the cost and length of commercial arbitration under control
    • Methods to improve your odds of getting a just result (or at least make a predictable business resolution more likely)

Important things to remember for your arbitration:

  • Choice of arbitrator is key
    • You can’t choose your judge but you can choose your arbitrator
    • Do you want someone with business/industry specific knowledge? (quicker understanding – better business understanding informs result)
    • You can interview candidates to assess style, philosophy, and availability
    • Consider foregoing a three-arbitrator panel in favor of a sole arbitrator; data shows that three-arbitrator panels take longer and are more than three times more expensive
    • Reserve the three-arbitrator panel for the biggest cases
  • Outside counsel plays a key role in controlling time and cost:
    • Arbitration is not for beginners; you need judgment and experience to make choices about process and discovery because you won’t get what you would in a court litigation
    • Work with your client to do an internal assessment using the information the client has
    • Adopt a cooperative attitude, not a strategically obstructive one
    • Excessive discovery and motion practice reduces counsel’s credibility with the arbitrators
    • In general, treating an arbitration like a court litigation loses the time and cost benefits of the arbitration for your client and reduces your credibility with the panel
  • Other key ways to reduce time and cost in a commercial arbitration:
    • Agree on a limit of time between the appointment of the arbitrator and the time of the award—generally, less than one year
    • Limit discovery and formality; do not adopt the Federal Rules of Civil Procedure or the Federal Rules of Evidence.  An arbitrator will know how much weight to give evidence, so double hearsay will not be impressive; this is really a bench trial context
    • Rely heavily on the internal assessment of the client’s information and “80/20 rule”—in essence, working with your client, all you need to know is about 80% of what is out there to make a good decision about how to proceed and how much to invest in a matter
    • Manage motion practice—truly meet and confer with your adversary
    • Adopt efficient hearing practices—insist on consecutive hearing days, time clock, joint exhibit binders, written direct testimony of fact witnesses, and controls on expert testimony (such as testifying by topic to reduce “ships passing in the night”)
    • Keep open settlement pathways—mediate during arbitration, use settlement counsel, have communications between inside counsel (using a prevailing party provision in the arbitration clause regarding costs may help drive settlement)
    • Consider reining in the possible result through the use of baseball arbitration or a high-low agreement

A well-drafted dispute resolution clause is important:

  • The clause helps ensure that your client gets from the arbitration what they want (usually, a fair and efficient process, minimal to no court intervention, an arbitrator with final decision-making authority, and a meaningful and enforceable outcome)
  • Draft the clause with an eye toward avoiding disputes later
  • Avoid boilerplate: focus on the specific client, the specific contract, and what disputes are likely to arise
    • Be clear about what disputes will be arbitrated and that the process is binding.
    • Choose rules—administered arbitration is best (AAA, CPR, JAMS) rather than ad hoc
    • For multi-tiered dispute resolution clauses:
      • Establish deadlines for the completion of each step of a multi-tiered dispute resolution process
      • Require that mediation be conducted pursuant to an established set of rules
      • Grant the arbitrator the authority to resolve disputes over conditions precedent
    • When considering what types of procedures to apply, use a specific set of procedures (e.g., expedited):
      • In accordance with the ADR provider’s rules; or
      • Based on the amount of the controversy; or
      • By mutual agreement of the parties post-dispute
    • Consider “issues-based” baseball arbitration, where each side would submit its position on agreed dispute issues without legal argument
    • Specify a locale for the arbitration hearing – be specific, don’t say parties will “mutually agree” later on the locale, because you won’t
    • Provide the choice of law for contract and procedural aspects
    • Specify the type of award: standard, reasoned (but understand the increased cost of a reasoned award)
    • Consider limits on discovery
    • With regard to arbitrator selection, be clear about what you are providing for
      • Number of arbitrators: 1 or 3, or other? Can vary with claim amount—three arbitrators for a larger claim.
      • For a 3-arbitrator panel where 2 are party-appointed, specify how selection works if there are more than 2 parties and whether the party-appointed arbitrators are neutral (recommended) or non-neutral
      • For the selection process, it is easiest and cleanest to adopt the provider’s procedures; if not, then consider all contingencies in the process you create
      • Specify a time frame for completing each step of the selection process, and provide a fallback in case the selection process fails
      • Make arbitrator qualifications clear, unambiguous and not too limiting
  • Judicial review of arbitration awards is set by statute; parties cannot through the arbitration clause convey greater jurisdiction on the courts.
    • But consider adding to an arbitration clause a provider’s optional appellate rules (arbitrator panel review with broader standard of review than vacatur grounds)

Note: Further information on this topic can be found in an article co-authored by Conna A. Weiner and Steven Greenspan of United Technologies, published in the March 2017 ACC Docket, entitled “Reassessing Commercial Arbitration: Making it Work for Your Company.”

Kelly Turner is a vice president with the American Arbitration Association in Chicago, Illinois. Conna A. Weiner is a mediator and arbitrator with JAMS in Boston, Massachusetts.

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